Oil up on falling U.S. inventories, Saudi cuts to Asia

"A bigger than expected drop in oil and fuel stocks received the initial bullish attention".

Oil prices edged up on Tuesday, driven by anticipation that an OPEC-led pledge to cut production would be extended beyond the first half of the year and into 2018, although overall high supply still weighed on markets. US light crude oil was 69 cents higher at $46.57 a barrel.

"The market is getting exhausted of hearing from OPEC how good they are, how compliant (with supply curbs) they are", said Eugen Weinberg, head of commodity research at Commerzbank. The twelve member states will be joined by Russian Federation, but U.S. production remains a concern.

But prices, however, slumped in recent weeks due to rising US production, which undermined the OPEC-led efforts to reduce a global crude glut.

"Oil prices are still finding it hard to recoup the losses they suffered last week", analysts at Commerzbank (Xetra: CBK100 - news) said in a note, adding the impact on prices from the fall in USA inventories had been underwhelming. New projects are also starting up in Canada and Mexico which together have added a further 430,000 barrels a day to the market.

Government data Wednesday will show a 2 MMbbl decline, according to a Bloomberg survey.

Even though OPEC has stuck to its pledge to cut production, USA output has risen by more than 10 percent since mid-2016 to 9.3 million barrels per day, close to the output of Russian Federation and Saudi Arabia.

US crude production is expected to rise by more than previously expected in 2017 to 9.31 million barrels per day from 8.87 million bpd in 2016, a 440,000 bpd increase, the US Energy Information Administration said. The projection is four times higher than in November, when the group announced a production cut to try and re-balance oversupplied world markets.

OPEC's estimate of its oil production last month, compiled from five of six external data known as secondary sources, fell to 31.732 MMbpd, according to a person familiar with the matter.

He said a deal on cutting output could extend early into next year. U.S. West Texas Intermediate crude was up 29 cents, or 0.6 percent, at $46.17 a barrel.

The EIA raised its US oil production forecast to an average of 9.3 million barrels per a day (bpd) in 2017 and 10 million bpd in 2018 while it lowered its projection for average oil prices in 2017 to $52.60 a barrel for Brent and $50.68 for WTI. The EIA also raised its production forecast for 2018 from 9.9 million barrels a day to "almost" 10 million barrels.

The EIA crude report showed a big 5,247-million-barrel drop.

Prices are expected to firm early Wednesday in reaction to the news that state-owned Saudi Aramco will reduce oil supplies to Asian customers by about 7 million barrels in June.